Hello Fellow Bankbreakers,
Anyone who’s been sniffing around trading circles long enough knows about spikes and huge gaps and that stop losses will keep your losses to the maximum you establish unless, of course, the gaps and spikes blow right through them.
Well, I don’t recall ever hearing about what I call “leading take profits” by means of which you might capture huge profits if a spike or huge gap occurs in your favor when you’re not looking. Without a take profit near the extreme level of the spike or gap, what could have been a huge profit will instead be flushed along with whatever you might have flushed when you were away from your computer because after such huge, quick advances price normally backs up to a level more in keeping with the market average.
What to do? What if, at the same time you set your stop loss you also set a take profit to 4:1 or 5:1; and as price advances in your favor, periodically advance your take profit by the same amount? It’s like a trailing stop, but at the other end. Hence, a “leading take profit.” If price retreats, perhaps pull it back by the same amount.
This method is easiest to implement if you don’t normally set take profit levels: all you’ll need is one take profit; but if you do normally set take profits, you’ll need to set an extra one beyond your normal level or levels.
As I said, please don’t hold me to the details. I’m just flying the idea by you as a general concept.
I would truly like to know what you think of the idea and what you think would be a good way of advancing the leading take profit and, perhaps, pulling it back.